Economics at your fingertips  

On Equivalence Results in Business Cycle Accounting

Kengo Nutahara and Masaru Inaba

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: Business cycle accounting rests on the insight that the prototype neoclassical growth model with time-varying wedges can achieve the same allocation generated by a large class of frictional models: equivalence results. Equivalence results are shown under general conditions about the process of wedges while it is often specified to be the first order vector autoregressive when one applies business cycle accounting to actual data. In this paper, we characterize the class of models covered by the prototype model under the conventional first order vector autoregressive specification of wedges and find that it is much smaller than that believed in previous literature. We also apply business cycle accounting to an artificial economy where the equivalence does not hold and provide a numerical example that business cycle accounting works well even in such an economy.

Pages: 38 pages
Date: 2008-05
New Economics Papers: this item is included in nep-acc, nep-bec, nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7) Track citations by RSS feed

Downloads: (external link) (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in Discussion papers from Research Institute of Economy, Trade and Industry (RIETI) Contact information at EDIRC.
Bibliographic data for series maintained by TANIMOTO, Toko ().

Page updated 2021-03-28
Handle: RePEc:eti:dpaper:08015